Insurance Act, 1938
[4 OF 1938]1
An Act to consolidate and amend the law relating to the business of insurance
WHEREAS it is expedient to consolidate and amend the law relating to the business of insurance; it is hereby enacted as follows:—
PART I
PRELIMINARY
Short title, extent and commencement.
1. (1) This Act may be called the Insurance Act, 1938.
(2)It extends to the whole of India 2[***].
(3)It shall come into force on such date3 as the Central Government may, by notification in the Official Gazette, appoint in this behalf. Definitions.
2. In this Act, unless there is anything repugnant in the subject or context,— 4[(1) “actuary” means an actuary as defined in clause (a) of sub-section (1) of section 2 of the Actuaries Act, 2006 (35 of 2006);]
1. Dated 26-2-1938.
The Act has been extended to Goa, Daman and Diu by the Goa, Daman and Diu (Laws) Regulation, 1962, w.e.f. 22-11-1962; Pondicherry by the Pondicherry (Laws) Regulation, 1963, w.e.f. 1-10-1963; Dadra and Nagar Haveli by the Dadra and Nagar Haveli (Laws) Regulation, 1963, w.e.f. 1-7-1965; Union Territory of Lakshadweep by the Laccadive, Minicoy and Amindivi Islands (Laws) Regulation, 1965 and State of Sikkim, w.e.f. 1-7-1965, vide S.O. 274(E), dated 24-6-1975.
2. Words “except the State of Jammu and Kashmir” omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
3. With effect from 1-7-1939. Vide Notification No. 589-I(4)/38, dated 1-4-1939.
4. Substituted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to its substitution, clause (1), as amended by the Insurance (Amendment) Act, 2002, w.e.f. 23-9-2002, read as under :
‘(1) “actuary” means an actuary possessing such qualifications as may be specified by the regulations made by the Authority;’
5[(1A) “Authority” means the Insurance Regulatory and Development Authority of India established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);]
(2) “policy-holder” includes a person to whom the whole of the interest of the policy-holder in the policy is assigned once and for all, but does not include an assignee thereof whose interest in the policy is defeasible or is for the time being subject to any condition;
(3) “approved securities” means—
(
i) Government securities and other securities charged on the revenues of the Central Government or of the Government of a 6[***] State or guaranteed fully as regards principal and interest by the Central Government, or the Government of any 6[***] State;
(ii) debentures or other securities for money issued under the authority of any Central Act or Act of a State Legislature by or on behalf of a port trust or municipal corporation or city improvement trust in any presidency-town;
(iii) shares of a corporation established by law and guaranteed fully by the Central Government or the Government of a 6[***] State as to the repayment of the principal and the payment of dividend;
(iv) securities issued or guaranteed fully as regards principal and interest by the Government of any Part B State and specified as approved securities for the purposes of this Act by the Central Government by notification in the Official Gazette; 7[and]
(v) 8[***]
9[Explanation.—In sub-clauses (i) and (iii), “Government of a State” in relation to any period before the 1st November, 1956, means the Government of a Part A State;]
5. Substituted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to its substitution, clause (1A), as inserted by the Insurance Regulatory and Development Authority Act, 1999, w.e.f. 19-4-2000, read as under :
‘(1A) “Authority” means the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);’
6. Words “Part A” omitted by the Adaptation of Laws (No. 3) Order, 1956, w.r.e.f. 1-11-1956.
7. Need be omitted.
8. Omitted by the Insurance (Amendment) Act, 2002, w.e.f. 23-9-2002. Prior to its omission, clause (v) read as under :
“(v) subject to the limitations contained in the proviso hereto, securities guaranteed fully as regards principal and interest by a Provincial Government in Pakistan or charged on the revenues of any part of that Dominion, and debentures or other securities for money issued by or on behalf of the trustees of the port of Karachi :
Provided that securities or debentures specified in item (v) shall be recognised as approved securities only for such purposes and for such period and subject to such conditions as may be prescribed.”
9. Inserted by the Adaptation of Laws (No. 3) Order, 1956, w.r.e.f. 1-11-1956.
(4) “Auditor” means a person qualified under the Chartered Accountants Act, 1949 (38 of 1949), to act as an auditor of companies;
(4A) “banking company” and “company” shall have the meanings respectively assigned to them in clauses (c) and (d) of sub-section (1) of section 5 of the Banking Companies Act, 1949 (10 of 1949);
(5) “certified” in relation to any copy or translation of a document required to be furnished by or on behalf of an insurer or a provident society as defined in Part III means certified by a principal officer of such insurer or provident society to be a true copy or a correct translation, as the case may be;
(5A) 10[***]
11[(5B) “Controller of Insurance” means the officer appointed by the Central Government under section 2B to exercise all the powers, discharge the functions and perform the duties of the Authority under this Act or the Life Insurance Corporation Act, 1956 (31 of 1956) or the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) or the Insurance Regulatory and Development Authority Act, 1999;]
(6) “Court” means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction;
(6A) “fire insurance business” means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies;
(6B) “general insurance business” means fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them;
12[(6C) “health insurance business” means the effecting of contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, whether in-patient or out-patient travel cover and personal accident cover;]
(7) “Government security” means a Government security as defined in the Public Debt Act, 1944 (18 of 1944);
10. Omitted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to its omission, clause (5A) read as under :
‘(5A) “chief agent” means a person who, not being a salaried employee of an insurer, in consideration of any commission—
(i) performs any administrative and organising functions for the insurer, and
(ii) procures life insurance business for the insurer by employing or causing to be employed insurance agents on behalf of the insurer;’
11. Substituted by the Insurance Regulatory and Development Authority Act, 1999, w.e.f. 19-4-2000. Prior to its substitution, clause (5B) read as under :
‘(5B) “Controller of Insurance” or “Controller” means the officer appointed by the Central Government to perform the duties of the Controller of Insurance under this Act;’
12. Inserted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014.
13[(7A) “Indian insurance company” means any insurer, being a company which is limited by shares, and,—
(
a) which is formed and registered under the Companies Act, 2013 (18 of 2013) as a public company or is converted into such a company within one year of the commencement of the Insurance Laws (Amendment) Act, 2015;
13a[(b) in which the aggregate holdings of equity shares by foreign investors including portfolio investors, do not exceed seventy-four per cent of the paid-up equity capital of such Indian insurance company, and the foreign investment in which shall be subject to such conditions and manner, as may be prescribed;]
(
c) whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurance business;]
(8 ) 14[***]
15[(8A) “insurance co-operative society” means any insurer being a co-operative society,—
(
a) which is registered on or after the commencement of the Insurance (Amendment) Act, 2002, as a co-operative society under the
13. Substituted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to its substitution, clause (7A), as inserted by the Insurance Regulatory and Development Authority Act, 1999, w.e.f. 19-4-2000, read as under :
‘(7A) “Indian insurance company” means any insurer being a company—
(a) which is formed and registered under the Companies Act, 1956 (1 of 1956);
(b) in which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed twenty-six per cent paid-up equity capital of such Indian insurance company;
(c) whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business.
Explanation.—For the purposes of this clause, the expression “foreign company” shall have the meaning assigned to it under clause (23A) of section 2 of the Income-tax Act, 1961 (43 of 1961);’
13a. Substituted by the Insurance (Amendment) Act, 2021, w.e.f. 1-4-2021. Prior to its substitution, sub-clause (b) read as under :
‘(b) in which the aggregate holdings of equity shares by foreign investors, including portfolio investors, do not exceed forty-nine per cent of the paid-up equity capital of such Indian insurance company, which is Indian owned and controlled, in such manner as may be prescribed.
Explanation.—For the purposes of this sub-clause, the expression “control” shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements;’
14. Omitted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to its omission, clause (8), as amended by the Companies (Second Amendment) Act, 2002, read as under:
‘(8) “insurance company” means any insurer being a company, association or partnership which may be wound up under the Companies Act, 1956 (1 of 1956), or to which the Indian Partnership Act, 1932 (9 of 1932), applies;’
15. Inserted by the Insurance (Amendment) Act, 2002, w.e.f. 23-9-2002.
Co-operative Societies Act, 1912 (2 of 1912) or under any other law for the time being in force in any State relating to co-operative societies or under the Multi-State Co-operative Societies Act, 1984 (51 of 1984);
16[(b) having a minimum paid-up capital of rupees one hundred crore in case of life insurance business, general insurance business and health insurance business;]
(
c) in which no body corporate, whether incorporated or not, formed or registered outside India, either by itself or through its subsidiaries or nominees, at any time, holds more than twenty-six per cent of the capital of such co-operative society;
(
d) whose sole purpose is to carry on life insurance business or general insurance business 17[or health insurance business] in India;]
18[(9) “insurer” means—
(a) an Indian Insurance Company, or
(b) a statutory body established by an Act of Parliament to carry on insurance business, or
(c) an insurance co-operative society, or
(d) a foreign company engaged in re-insurance business through a branch established in India.
16. Substituted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to its substitution, sub-clause (b) read as under :
“(b) having a minimum paid-up capital, (excluding the deposits required to be made under section 7) of rupees one hundred crores;”
17. Inserted, ibid.
18. Substituted, ibid. Prior to its substitution, clause (9), as amended by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956, read as under :
‘(9) “insurer” means—
(
a) any individual or unincorporated body of individuals or body corporate incorporated under the law of any country other than India, carrying on insurance business (not being a person specified in sub-clause (c) of this clause) which— (i) carries on that business in India, or
(ii) has his or its principal place of business or is domiciled in India, or (iii) with the object of obtaining insurance business, employs a representative, or maintains a place of business, in India;
(b) any body corporate (not being a person specified in sub-clause (c) of this clause) carrying on the business of insurance, which is a body corporate incorporated under any law for the time being in force in India; or stands to any such body corporate in the relation of a subsidiary company within the meaning of the Indian Companies Act, 1913 (7 of 1913), as defined by sub-section (2) of section 2 of that Act, and
(c) any person who in India has a standing contract with underwriters who are members of the Society of Lloyd’s whereby such person is authorised within the terms of such contract to issue protection notes, cover notes, or other documents granting insurance cover to others on behalf of the underwriters, but does not include a principal agent, chief agent, special agent, or an insurance agent or a provident society as defined in Part III;’
Explanation.—For the purposes of this sub-clause, the expression “foreign company” shall mean a company or body established or incorporated under a law of any country outside India and includes Lloyd’s established under the Lloyd’s Act, 1871 (United Kingdom) or any of its Members;]
(10) “insurance agent” means an insurance agent 19[***] 20[***] who receives or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business including business relating to the continuance, renewal or revival of policies of insurance;
(10A) “investment company” means a company whose principal business is the acquisition of shares, stocks, debentures or other securities;
21[(10B) “intermediary or insurance intermediary” shall have the meaning assigned to it in clause (f) of sub-section (1) of section 2 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);]
(11) “life insurance business” means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include—
(a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance,
(b) the granting of annuities upon human life, and
(c) the granting of superannuation allowances and 22[benefit] payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons.
23[Explanation.—For the removal of doubts, it is hereby declared that “life insurance business” shall include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment and a component of insurance issued by an insurer referred to in clause (9) of this section;]
19. Words “licensed under section 42” omitted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014.
20. Words “being an individual” omitted by the Insurance (Amendment) Act, 1957, w.r.e.f. 1-9-1957.
21. Inserted by the Insurance (Amendment) Act, 2002, w.e.f. 23-9-2002.
22. Substituted for “annuities” by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014.
23. Inserted by the Securities and Insurance Laws (Amendment and Validation) Act, 2010, w.r.e.f. 9-4-2010.
(12) 24[***]
(13) 24[***]
(13A) “marine insurance business” means the business of effecting contracts of insurance upon vessels of any description, including cargoes, freights and other interests which may be legally insured, in or in relation to such vessels, cargoes and freights, goods, wares, merchandise and property of whatever description insured for any transit by land or water, or both and whether or not including warehouse risks or similar risks in addition, or as incidental to such transit, and includes any other risks customarily included among the risks insured against in marine insurance policies; (13B) “miscellaneous insurance business” means the business of effecting contracts of insurance which is not principally or wholly of any kind or kinds included in clauses (6A), (11) and (13A);
25[(13BA) “National Company Law Tribunal” means the National Company Law Tribunal constituted under section 10FB of 26[the Companies Act, 2013 (18 of 2013)];
(13BB) “National Company Law Appellate Tribunal” means the National Company Law Appellate Tribunal constituted under sub-section (1) of section 10FR of the 26[Companies Act, 2013 (18 of 2013)];]
(14) “prescribed” means prescribed by rules made under 27[this Act]; and (14A) 28[***]
(15) 29[***]
24. Omitted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to their omission, clauses (12) and (13) read as under : ‘(12) “manager” and “officer” have the meanings assigned to those expressions in clauses (9) and (11) respectively of section 2 of the Indian Companies Act, 1913 (7 of 1913); (13) “managing agent” means a person, firm or company entitled to the management of the whole affairs of a company by virtue of an agreement with the company, and under the control and direction of the directors except to the extent, if any, otherwise provided for in the agreement, and includes any person, firm or company occupying such position by whatever name called.
Explanation. —If a person occupying the position of managing agent calls himself manager or managing director, he shall nevertheless be regarded as managing agent for the purposes of section 32 of this Act;’
25. Inserted by the Companies (Second Amendment) Act, 2002, w.e.f. 1-4-2003.
26. Substituted for “Companies Act, 1956 (1 of 1956)” by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014.
27. Substituted for “section 114” by the Insurance Regulatory and Development Authority Act, 1999, w.e.f. 19-4-2000.
28. Omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956. Prior to its omission, clause (14A) as inserted by the Adaptation of Laws Order, 1950, read as under: “(14A) ‘State’ means a Part A State or a Part C State and ‘States’ means all the territories for the time being comprised in Part A States and Part C States.”
29. Omitted by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014. Prior to its omission, clause (15) read as under :
‘(15) “principal agent” means a person who, not being a salaried employee of an insurer, in consideration of any commission,—
(i) performs any administrative and organising functions for the insurer, and (ii) procures general insurance business whether wholly or in part by employing or causing to be employed insurance agents on behalf of the insurer;’
(16) “private company” and “public company” have the meanings respectively assigned to them in 30[clause (68) and clause (72) of section 2 of the Companies Act, 2013 (18 of 2013)];
31[(16A) “regulations” means the regulations framed by the Insurance Regulatory and Development Authority of India established under the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(16B) “re-insurance” means the insurance of part of one insurer’s risk by another insurer who accepts the risk for a mutually acceptable premium;
(16C) “Securities Appellate Tribunal” means the Securities Appellate Tribunal established under section 15K of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]
(17) 32[***]
SECTION NOTES
COMMENTS
2.1 Definition of “Approved Securities” [Section 2(3)]
Government securities and other securities:
Charged on the revenues of the Central Government or a State Government.
Fully guaranteed by the Central Government or a State Government regarding principal and interest.
Debentures or other securities for money:
Issued under the authority of a Central Act or a State Legislature Act.
Issued by or on behalf of a port trust, municipal corporation, or city improvement trust in any presidency town.
Shares of a corporation established by law:
Fully guaranteed by the Central Government or a State Government as to the repayment of the principal and the payment of dividend.
Securities issued or fully guaranteed by the Government of any Part B State regarding principal and interest.
Must be specified as approved securities for this Act by the Central Government via a notification in the Official Gazette.
2.1-1 Meaning of “Government of a State”
For the purposes of sub-clauses (i) and (iii), “Government of a State,” in relation to any period before November 1, 1956, means the Government of a Part A State.
30. Substituted for “clauses (13) and (13A) of section 2 of the Indian Companies Act, 1913 (7 of 1913)” by the Insurance Laws (Amendment) Act, 2015, w.r.e.f. 26-12-2014.
31. Clauses 16A to 16C inserted, ibid.
32. Omitted, ibid. Prior to its omission, clause (17) read as under : ‘(17) “special agent” means a person who, not being a salaried employee of an insurer, in consideration of any commission, procures life insurance business for the insurer whether wholly or in part by employing or causing to be employed insurance agents on behalf of the insurer, but does not include a chief agent.’
